Capital structure and financing

12 Months Ended

Dec. 31, 2019

Share Capital, Reserves And Other Equity Interest And Financial Instruments [Abstract]

Share capital, share premium and reserves

Common shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

Where any Group company purchases the Company’s share capital, the consideration paid, including any directly attributable incremental costs, is shown under Treasury shares and deducted from equity attributable to the Company’s equity holders until the shares are canceled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental costs and the related income tax effects is included in equity attributable to the Company’s equity holders.

Share capital, share premium



	2019	2018
Authorized and registered share capital (number of shares)	133,333,200	133,333,200
Subscribed and fully paid up share capital (number of shares)	101,739,217	101,739,217
Par value per share	1.50	1.50
Share capital (US$ millions)	153	153
Share premium (US$ millions)	480	482
Total (US$ millions)	633	635

Other equity reserves



	Legal reserve	Equity settled transaction reserve		Hedge reserve		Currency translation reserve		Pension obligation reserve		Total
	(US$ millions)
As of January 1, 2017	16	43		(4	)	(616	)	(1	)	(562	)
Share based compensation	—	22		—		—		—		22
Issuance of shares – 2014, 2015, 2016 LTIPs	—	(18	)	—		—		—		(18	)
Remeasurements of post-employment benefit obligations	—	—		—		—		(2	)	(2	)
Cash flow hedge reserve movement	—	—		4		—		—		4
Currency translation movement	—	—		—		85		—		85
As of December 31, 2017	16	46		—		(531	)	(3	)	(472	)
Share based compensation	—	22		—		—		—		22
Issuance of shares –2015, 2016, 2017 LTIPs	—	(22	)	—		—		—		(22	)
Cash flow hedge reserve movement	—	—		(1	)	—		—		1
Currency translation reserved recycled to statement of income	—	—		—		—		—		—
Currency translation movement	—	—		—		(68	)	—		(67	)
As of December 31, 2018	16	47		(1	)	(599	)	(3	)	(538	)
Share based compensation	—	29		—		—		—		29
Issuance of shares –2016, 2017, 2018, 2019 LTIPs	—	(25	)	—		—		—		(25	)
Cash flow hedge reserve movement	—	—		(16	)	—		—		(16	)
Currency translation movement	—	—		—		(2	)	—		(2	)
Effect of restructuring in Tanzania	—	—		—		9		—		9
As of December 31, 2019	16	52		(18	)	(593	)	(2	)	(544	)

Legal reserve

If Millicom International Cellular S.A. reports an annual net profit on a non-consolidated basis, Luxembourg law requires appropriation of an amount equal to at least 5% of the annual net profit to a legal reserve until such reserve equals 10% of the issued share capital. This reserve is not available for dividend distribution. No appropriation was required in 2018 or 2019 as the 10% minimum level was reached in 2011 and maintained each subsequent year.

Equity settled transaction reserve

The cost of LTIPs is recognized as an increase in the equity-settled transaction reserve over the period in which the performance and/or service conditions are rendered. When shares under the LTIPs vest and are issued the corresponding reserve is transferred to share premium.

Hedge reserve

The effective portions of changes in value of cash flow hedges are recorded in the hedge reserve (see note C.1. ).

Currency translation reserve

In the financial statements, the relevant captions in the statements of financial position of subsidiaries without US dollar functional currencies are translated to US dollars using the closing exchange rate. Statements of income or statement of income captions (including those of joint ventures and associates) are translated to US dollars at monthly average exchange rates during the year. The currency translation reserve includes foreign exchange gains and losses arising from these translations. When the Group disposes of or loses control or significant influence over a foreign operation, exchange differences that were recorded in equity are recognized in the consolidated statement of income as part of gain or loss on sale or loss of control and/or significant influence.

Dividend distributions

On May 2, 2019, a dividend distribution of $2.64 per share from Millicom’s retained profits at December 31, 2018, was approved by the shareholders at the AGM and paid in equal portions in May and November 2019.

On May 4, 2018, a dividend distribution of $2.64 per share from Millicom’s retained profits at December 31, 2017, was approved by the shareholders at the AGM and paid in equal portions in May and November 2018.

On May 4, 2017, a dividend distribution of $2.64 per share from Millicom’s retained profits at December 31, 2016, was approved by the shareholders at the AGM and distributed in May 2017.

The ability of the Company to make dividend payments is subject to, among other things, the terms of indebtedness, legal restrictions and the ability to repatriate funds from Millicom’s various operations. At December 31, 2019, $306 million (December 31, 2018: $324 million; December 31, 2017: $345 million) of Millicom’s retained profits represent statutory reserves that are unavailable to be distributed to owners of the Company.

Debt and financing

Debt and financing by type (i)



	Note	2019		2018
		(US$ millions)
Debt and financing due after more than one year
Bonds	C.3.1.	4,067		2,501
Banks	C.3.2.	1,805		1,324
Finance leases (ii)	C.3.4.	—		353
Other financing (iii)		43		113
Total non-current financing		5,915		4,291
Less: portion payable within one year		(129	)	(168	)
Total non-current financing due after more than one year		5,786		4,123
Debt and financing due within one year
Bonds	C.3.1.	46		—
Banks	C.3.2.	11		289
Total current debt and financing		57		289
Add: portion of non-current debt payable within one year		129		168
Total		186		458
Total debt and financing		5,972		4,580


(i)	See note D.1.1 for further details on maturity profile of the Group debt and financing.

(ii) Finance lease liabilities were included in Debt and Financing until 31 December 2018, but were reclassified to lease liabilities on January 1, 2019 when adopting the new leasing standard. See above in the "New and amended IFRS accounting standards" and below in notes C.4. and E.4. for further information about the change in accounting policy for leases.


(iii)	In July 2018, the Company issued a COP144,054.5 million /$50 million bilateral facility with IIC (Inter-American Development Bank) for a USD indexed to COP Note. The note bears interest at 9.450% p.a.. This COP Note is used as net investment hedge of the net assets of our operations in Colombia.

Debt and financing by location



	2019	2018
	(US$ millions)
Millicom International Cellular S.A. (Luxembourg)	2,773	1,770
Colombia	827	1,016
Paraguay	502	504
Bolivia	350	317
Panama	918	261
Tanzania	186	201
Chad	—	64
Costa Rica	148	148
El Salvador	268	299
Total debt and financing	5,972	4,580

Debt and financings are initially recognized at fair value, net of directly attributable transaction costs. They are subsequently measured at amortized cost using the effective interest rate method or at fair value. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the effective interest rate. Any difference between the initial amount and the maturity amount is recognized in the consolidated statement of income over the period of the borrowing. Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at least 12 months from the statement of financial position date.

Bond financing



	Note	Country	Maturity	Interest Rate %		2019	2018
						(US$ millions)
SEK Variable Rate Notes	1	Luxembourg	2024	STIBOR (i) + 2.350%		211	—
USD 6.625% Senior Notes	2	Luxembourg	2026	6.625	%	495	495
USD 6.000% Senior Notes	3	Luxembourg	2025	6.000	%	492	491
USD 6.250% Senior Notes	4	Luxembourg	2029	6.250	%	742	—
USD 5.125% Senior Notes	5	Luxembourg	2028	5.125	%	492	493
USD 6.750% Senior Notes	6	Paraguay	2022	6.750	%	—	297
USD 5.875% Senior Notes	6	Paraguay	2027	5.875	%	296	—
PYG 9.250% Notes	6	Paraguay	2026	9.250	%	2	—
PYG 8.750% Notes (tranche A)	6	Paraguay	2024	8.750	%	18	—
PYG 9.250% Notes (tranche B)	6	Paraguay	2026	9.250	%	8	—
PYG 10.000% Notes (tranche C)	6	Paraguay	2029	10.000	%	10	—
PYG 10.000% Notes	6	Paraguay	2029	10.000	%	4	—
BOB 4.750% Notes	7	Bolivia	2020	4.750	%	30	59
BOB 4.050% Notes	7	Bolivia	2020	4.050	%	4	7
BOB 4.850% Notes	7	Bolivia	2023	4.850	%	57	71
BOB 3.950% Notes	7	Bolivia	2024	3.950	%	36	43
BOB 4.300% Notes	7	Bolivia	2029	4.300	%	21	23
BOB 4.300% Notes	7	Bolivia	2022	4.300	%	26	30
BOB 4.700% Notes	7	Bolivia	2024	4.700	%	32	35
BOB 5.300% Notes	7	Bolivia	2026	5.300	%	13	13
BOB 5.000% Notes	7	Bolivia	2026	5.000	%	61	0
BOB 4.600% Notes	7	Bolivia	2024	4.600	%	40	0
UNE Bond 1 (tranches A and B)	8	Colombia	2020	CPI + 5.10%		46	46
UNE Bond 2 (tranches A and B)	8	Colombia	2023	CPI + 4.76%		46	46
UNE Bond 3 (tranche A)	8	Colombia	2024	9.350	%	49	49
UNE Bond 3 (tranche B)	8	Colombia	2026	CPI+4.15%		78	78
UNE Bond 3 (tranche C)	8	Colombia	2036	CPI+4.89%		38	39
USD 4.500% Senior Notes	9	Panama	2030	4.500	%	584	—
Cable Onda Bonds 5.750%	9	Panama	2025	5.750	%	184	184
Total bond financing						4,113	2,501


(i)	STIBOR – Swedish Interbank Offered Rate.


(1)	SEK Notes

On May 15, 2019, MIC S.A. completed its offering of a SEK 2 billion floating rate senior unsecured sustainability bond due 2024. The bond carries a floating coupon of 3-month Stibor+235bps which we swapped with various banks to hedge its interest rate exposure, pursuant to which it will effectively pay fixed-rate coupons in US dollars between 4.990% and 4.880% (see D.1.2.). The bond has been listed and commenced trading on the Nasdaq Stockholm sustainable bond list on June 12, 2019. Millicom is using the net proceeds of the bond in accordance with the Sustainability Bond Framework which includes both environmental and social investments such as in energy efficiencies, and the expansion of its fixed and mobile networks. Cost of issuance of $2.4 million is amortized over the five year life of the bond (the effective interest rate is 0.200%)


(2)	USD 6.625% Senior Notes

On October 16, 2018, the MIC S.A. issued $500 million aggregate principal amount of 6.625% Senior Notes due 2026. The Notes bear interest at 6.625% p.a., payable semiannually in arrears on each interest payment date. Proceeds were used to finance Cable Onda’s acquisition (Note A.1.2.). Costs of issuance of $6 million is amortized over the eight-year life of the notes (the effective interest rate is 6.750%).


(3)	USD 6.000% Senior Notes

On March 17, 2015, MIC S.A. issued a $500 million 6.000% fixed interest rate notes repayable in ten years, to repay the El Salvador 8.000% senior notes and for general corporate purposes. The notes have an effective interest rate of 6.132%. A total amount of $8.6 million of withheld and upfront costs are being amortized over the ten-year life of the bond. On April 8, 2019, the Group obtained consents from the holders of its $500 million 6.000% notes to amend certain provisions of the indenture governing the notes. MIC S.A. paid a cash payment of $1 million (equal to $2.50 per $1,000 principal amount of Notes to holders of the Notes).


(4)	USD 6.250% Senior Notes

On March 25, 2019, MIC S.A. issued $750 million of 6.250% notes due 2029. The notes bear interest at 6.250% p.a., payable semi-annually in arrears on March 25 and September 25 of each year, starting on September 25, 2019. The net proceeds were used to finance, in part, the completed Telefonica CAM Acquisitions (see note A.1.2.). Costs of issuance of $8.2 million are amortized over the ten-year life of the notes (the effective interest rate is 6.360%).


(5)	USD 5.125% Senior Notes

On September 20, 2017, MIC S.A. issued a $500 million, ten-year bond due January 2028, with an interest rate of 5.125%. Costs of issuance of $7 million are amortized over the ten year life of the notes (effective interest rate is 5.240%).


(6)	PYG Notes

In April 2019, Telefónica Celular del Paragua S.A.E. issued $300 million 5.875% senior notes due 2027. The notes bear interest at 5.875% p.a., payable semi-annually in arrears on April 15 and October 15 of each year, starting on October 15, 2019. The net proceeds were used to finance the purchase of the Telecel 6.750% 2022 notes. Costs of issuance of $4 million are amortized over the eight-year life of the notes (the effective interest rate is 6.000%).

In June, 2019, Telefónica Celular del Paraguay S.A.E. issued notes in three series under its PYG 300 billion program as follows: Series A for PYG 115 billion (approximately $18 million), with a fixed annual interest rate of 8.750%, maturing in June 2024, series B for PYG 50 billion (approximately $8 million) with a fixed annual interest rate of 9.250%, maturing in May 2026 and series C for PYG 65 billion (approximately $10 million) with a fixed annual interest rate of 10.000%, maturing in May 2029. On December 27, 2019, under the same program, they issued PYG. 35 billion (Approximately $5.4 million) in two tranches: (i) PYG 10 billion (approximately $1.5 million) which bears a fixed annual interest rate of 9.250% and matures on December 30, 2026; and (ii) PYG 25 billion (approximately $3.9 million) which bears a fixed annual interest rate of 10.000% and matures on December 24, 2029.


(7)	BOB Notes

In May 2012, Telefónica Celular de Bolivia S.A. issued BOB 1.36 billion of notes repayable in installments until April 2, 2020. Distribution and other transaction fees of BOB5 million reduced the total proceeds from issuance to BOB 1.32 billion ($191 million). The bond has a 4.750% per annum coupon with interest payable semi-annually in arrears in May and November each year. The effective interest rate is 4.790%. These bonds are listed on the Bolivia Stock Exchange.

In November 2015, they issued BOB696 million (approximately $100 million) of notes in two series, series A for BOB104.4 million (approximately $15 million), with a fixed annual interest rate of 4.050%, maturing in August 2020 and series B for BOB591.6 million (approximately $85 million) with a fixed annual interest rate of 4.850%, maturing in August 2023. The bond has coupon with interest payable semi-annually in arrears in March and September during the first two years, thereafter each February and August. The effective interest rate is 4.840%. These bonds are listed on the Bolivia Stock Exchange.

On August 11, 2016, Telefónica Celular de Bolivia S.A.. issued a new bond for a total amount of BOB522 million consisting of two tranches (approximately $50 million and $25 million, respectively). Tranche A and B bear fixed interest at 3.950% and 4.300%, and will mature in June 2024 and June 2029, respectively. These bonds are listed on the Bolivia Stock Exchange.

On October 12, 2017, they placed approximately $80 million of local currency bonds in three tranches, which will mature in 2022, 2024 and 2026 with a 4.300% , 4.700% and 5.300% respectively. These bonds are listed on the Bolivia Stock Exchange.

On July 3, 2019 they issued two bonds one for BOB 420 million (approximately $61 million) with a 5.000% coupon maturing on August 2026 and another one for BOB 280 million (approximately $40 million) with a 4.600% coupon maturing on August 2024. Interest payments is semiannual and both bonds are listed on the Bolivia Stock Exchange.


(8)	UNE Bonds

In March 2010, UNE issued a COP300 billion (approximately $126 million) bond consisting of two tranches with five and ten-year maturities. Interest rates are either fixed or variable depending on the tranche. Tranche A bears variable interest, based on CPI, in Colombian peso and paid in Colombian peso. Tranche B bears variable interest, based on fixed term deposits, in Colombian peso and paid in Colombian peso. UNE applied the proceeds to finance its investment plan. Tranche A matured in March 2015 and tranche B will mature in March 2020.

In May 2011, UNE issued a COP300 billion (approximately $126 million) bond consisting of two equal tranches with five and twelve-year maturities. Interest rates are variable and depend on the tranche. Tranche A had variable interest, based on CPI, in Colombian peso and paid in Colombian peso. Tranche B bears variable interest, based on CPI, in Colombian peso and paid in Colombian peso. UNE applied the proceeds to finance its investment plan. Tranche A matured in October 2016 and tranche B will mature in October 2023.

In May 2016, UNE issued a COP540 billion bond (approximately $176 million) consisting of three tranches (approximately $52 million, $83 million and $41 million respectively). Interest rates are either fixed or variable depending on the tranche. Tranche A bears fixed interest at 9.350%, while tranche B and C bear variable interest, based on CPI, (respective margins of CPI + 4.150% and CPI + 4.890%), in Colombian peso. UNE applied the proceeds to finance its investment plan and repay one bond (COP150 billion tranche). Tranches A, B and C will mature in May 2024, May 2026 and May 2036, respectively.

(9) Cable Onda Bonds

On August 4, 2015, Cable Onda issued local bonds in Panama for a total amount of $185 million. These bonds are listed on the Panama Stock Exchange and bear a fixed annual interest of 5.750% and are due on August 4, 2025. The bonds were assumed by Millicom as part of the acquisition of Cable Onda. See note A.1.2. for further details on the acquisition.

On November 1, 2019, Cable Onda issued $600 million aggregate principal amount of 4.500% senior notes due 2030 payable in U.S. dollars, registered with the Superintendencia del Mercado de Valores de Panamá and listed on the Luxembourg Stock Exchange and on the Panamá Stock Exchange. The Notes bear interest from November 1, 2019 at a rate of 4.500% per annum, payable on January 30, 2020 for the first payment and thereafter semiannually in arrears on each interest payment date. The proceeds were used to fund the Panama Acquisition and to refinance certain local financing. Costs of issuance of $16 million, which include an original issue discount (OID) is amortized over the ten-year life of the notes (the effective interest rate is 4.690%).

Bank and Development Financial Institution financing



	Note	Country	Maturity range	Interest rate	2019	2018
					(US$ millions)
Fixed rate loans
PYG Long-term loans	1	Paraguay	2020-2026	Fixed	166	180
USD - Long-term loans	2	Panama	2024	Fixed	150	24
BOB Long-term loans	3	Bolivia	2023-2025	Fixed	31	20
Variable rate loans
USD Long-term loans	4	Costa Rica	2023	Variable	148	148
USD Long-term loans		Chad	2019	Variable	—	1
USD Long-term loans	5	Tanzania	2020-2025	Variable	171	90
TZS Long-term loans	5	Tanzania	2025	Variable	14	—
USD Short-term loans	8	Luxembourg	2019	Variable	—	250
USD Long-term loans	8	Luxembourg	2024	Libor + 3.00%	298	—
COP Long-term loans	6	Colombia	2025-2030	Variable	274	277
USD Long-term loans	6	Colombia	2024	Variable	295	298
USD Credit Facility / Senior Unsecured Term Loan Facility	7	El Salvador	2021-2023	Variable	268	274
Other Long-term loans		Various		Various	—	51
Total Bank and Development Financial Institution financing					1,817	1,613


1.	Paraguay

In October 2015, Telefónica Celular del Paraguay S.A.E. entered into a five -year loan facility with Banco Itau for PGY 257,700 million (approximately $40 million) which bears a fixed annual interest rate. The final maturity of the loan is on September 10, 2020.

On July 4, 2017, Telefónica Celular del Paraguay S.A.E executed a five-year loan agreement with the IPS (Instituto de Prevision Social) and the Inter-American Development Bank, who acts as a guarantor, for a total amount of PYG $367,000 million (approximately $66 million). The loan, denominated in PYG with the final maturity in 2022. The guarantee under this facility is counter-guaranteed by MICSA.

In July 2018, Telefónica Celular del Paraguay S.A.E. executed a seven-year loan with Regional Bank for PYG 115,000 million (approximately $18 million with a final maturity in 2025.

On January 2, 2019, Telefónica Celular del Paraguay S.A.E. obtained a seven-year loan from BBVA Bank for PYG 177,000 million which is due on November, 26, 2025.

On September 25, 2019, Telefónica Celular del Paraguay S.A.E. executed an amended and restated agreement with Banco Continental S.A.E.C.A., to consolidate three existing loans, for a PYG 370,000 million (approximately $57 million). The new loan has a maturity of 7 years.


2.	Panama

On August 27, 2019, Cable Onda S.A entered into two credit agreements, one with Banco Nacional de Panama S.A , for $75 million which bears a fixed interest and has a 5 year duration and another one with the Bank of Nova Scotia (Sucursal Panama) for $75 million with a fixed interest and a five year duration to finance and refinance working capital and capital expenditures.


3.	Bolivia

In June 2018, Telefónica Celular de Bolivia S.A.. entered into a two tranche loan agreement with Banco BISA S.A for BOB 69.6 million (approximately $10 million) each, with a fixed interest rate. The loans have a term of 7 years.

In November 19, they executed a new loan with Banco de Crédito de Bolivia S.A for Bs. 78,000,000 (approximately$11 million), with semiannual payments and a fixed interest rate. The loan has a term of 4 years.


4.	Costa Rica

In April 2018, Millicom Cable Costa Rica S.A. entered into a $150 million variable rate syndicated loan with Citibank as agent.

In June 2018, Millicom Cable Costa Rica S.A. entered into a cross currency swap to hedge part of the principal of the loan against interest rate and currency risks. Interest rate and currency swap agreements had been made on $35 million of the principal amount and interest rate swaps for an additional $35 million.


5.	Tanzania

On June 4, 2019, MIC Tanzania Public Limited Company entered into a syndicated loan facility agreement with the Standard Bank of South Africa acting as an agent and a consortium of banks acting as the original lenders, for $174.75 million (tranche A) and TZS103,000 million (tranche B - approximately $45 million) which bears variable interests: for Tranche A Libor plus a margin and for Trance B T-Bill rate plus a margin. The facility agreement has an all asset debenture securing the whole amount, as well as a pledge over the shares of the immediate holding company of the borrower. The Facility was amended and restated on December 12, 2019 and has a maturity of 66 months. It is a stand-alone facility with an all asset debenture and a pledge on the shares of the immediate holding company of the borrower. .Margin and balance between USD and TSZ tranches may vary depending on the syndication demands.

6. Colombia

In December 20, 2019, our operation in Colombia executed an amendment to the $300 million loan between Colombia Móvil S.A. E.S.P. as borrower and UNE EPM Telecomunicaciones S.A., as guarantor with a consortium of banks to extend the maturity for 5 years (now due on December 20, 2024) and lower the applicable margin.

7. EL Salvador

On April 15, 2016, Telemovil El Salvador, S.A. de C.V. executed a senior unsecured term loan facility up to $50 million maturing in April 2021 and bearing variable interest per annum, which was restated and amended as of May 30, 2017, for a second tranche of $50 million. This facility is guaranteed by MICSA.. Later on, in January 2018, Telemovil El Salvador entered into a second amended and restated agreement with Scotiabank for a third tranche of $50 million with variable rate and with a 5-year bullet repayment, also guaranteed by MICSA.

In addition, they executed an interest rate swap with Scotiabank to fix interest rates for up to $100 million of the outstanding debt.

On June 3, 2016, Telemovil El Salvador, S.A. de C.V. executed a $30 million credit facility with Citibank N.A., for general corporate purposes maturing in June 2021 and bearing variable interest rate per annum. The facility is guaranteed by MICSA..

In March 2018, Telemovil El Salvador executed a $100 million credit facility with DNB at a variable rate facility with DNB and Nordea with a 5-year bullet repayment.The facility is guaranteed by MICSA..

8. Luxembourg

On April 24, 2019, MICSA. entered into a $300 million term facility agreement arranged by DNB Bank ASA, Sweden Branch and Nordea Bank Abp, Filial i Sverige. This facility has a variable interest rate and is fully drawn as at December 31, 2019 and is due on April 2024.

Right of set-off and derecognition

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

A financial asset (or a part of a financial asset or part of a group of similar financial assets) is derecognized when:


•	Rights to receive cash flows from the asset have expired; or


•	Rights to receive cash flows from the asset or obligations to pay the received cash flows in full without material delay have been transferred to a third party under a “pass-through” arrangement; and the Group has either transferred substantially all the risks and rewards of the asset or the control of the asset.

When rights to receive cash flows from an asset have been transferred or a pass-through arrangement concluded, an evaluation is made if and to what extent the risks and rewards of ownership have been retained. When the Group has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

A financial liability is derecognized when the obligation under the liability is discharged or canceled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of income.

Interest and other financial expenses

The Group’s interest and other financial expenses comprised the following:



	Year ended December 31,
	2019		2018		2017
	(US$ millions)
Interest expense on bonds and bank financing	(348	)	(234	)	(246	)
Interest expense on (finance) leases	(157	)	(91	)	(65	)
Early redemption charges	(10	)	(4	)	(43	)
Others	(47	)	(37	)	(35	)
Total interest and other financial expenses	(564	)	(367	)	(389	)

Finance leases - until December 31, 2018

As at December 31, 2018, Millicom’s finance leases mainly consisted of long-term lease of tower space from tower companies or competitors on which Millicom locates its network equipment.

Finance lease liabilities were included in Debt and Financing until December 31, 2018, but were reclassified to lease liabilities on January 1, 2019 in the process of adopting the new lease standard: IFRS 16. See above in the "New and amended IFRS accounting standards" and notes C.4. and E.4. for further information.

Finance lease liabilities

Under IAS 17, leases which transferred substantially all risks and benefits incidental to ownership of the leased item to the lessee were capitalized at the inception of the lease. The amount capitalized was the lower of the fair value of the asset or the present value of the minimum lease payments.

Lease payments were allocated between finance charges (interest) and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges were recorded as interest expenses in the statement of income.

The sale and leaseback of towers and related site operating leases and service contracts were accounted for in accordance with the underlying characteristics of the assets, and the terms and conditions of the lease agreements. When sale and leaseback agreements were concluded, the portions of assets that will not be leased back by Millicom were classified as assets held for sale as completion of their sale was highly probable. Asset retirement obligations related to the towers were classified as liabilities directly associated with assets held for sale. On transfer to the tower companies, the portion of the towers leased back were accounted for as operating leases or finance leases according to the criteria set out above. The portion of towers being leased back represented the dedicated part of each tower on which Millicom’s equipment was located and was derived from the average technical capacity of the towers. Rights to use the land on which the towers were located were accounted for as operating leases, and costs of services for the towers were recorded as operating expenses. The gain on disposal was recognized upfront for the portion of towers that is not leased back, and was deferred and recognized over the term of the lease for the portion leased back.

Finance lease liabilities at December 31, 2018



	Country	Maturity	2018
			(US$ millions)
Lease of tower space	Tanzania	2029/2030	112
Lease of tower space	Colombia Movil	2032	83
Lease of poles	Colombia (UNE)	2032	99
Lease of tower space	Paraguay	2030	27
Lease of tower space	El Salvador	2026	26
Other finance lease liabilities	various	various	6
Total finance lease liabilities			353

Tower Sale and Leaseback

In 2017 and 2018, the Group announced agreements to sell and leaseback wireless communications towers in Paraguay, Colombia and El Salvador. Total gain on sale recognized in 2019 was $5 million (2018: $61 million, 2017: $63 million) and cash received from these sales were $22 million, $141 million and $161 million, respectively.

Guarantees and pledged assets

Guarantees

Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognized, less cumulative amortization.

Liabilities to which guarantees are related are recorded in the consolidated statement of financial position under Debt and financing, and liabilities covered by supplier guarantees are recorded under Trade payables or Debt and financing, depending on the underlying terms and conditions.

Maturity of guarantees



	At December 31, 2019		At December 31, 2018
Terms	Outstanding exposure(i)	Maximum exposure(ii)	Outstanding exposure(i)	Maximum exposure(ii)
	(US$ millions)
0-1 year	29	29	133	133
1-3 years	134	134	281	281
3-5 years	300	300	212	212
Total	464	464	626	626


(i)	The outstanding exposure represents the carrying amount of the related liability at December 31.


(ii)	The maximum exposure represents the total amount of the Guarantee at December 31.

Pledged assets

As at December 31, 2019, the Group’s share of total debt and financing secured by either pledged assets, pledged deposits issued to cover letters of credit, or guarantees issued was $464 million (December 31, 2018: $626 million). Assets pledged by the Group over these debts and financings amounted to $1 million at December 31, 2019 (December 31, 2018: $2 million). The remainder represented primarily guarantees issued by Millicom S.A. to guarantee financings raised by other Group operating entities.

In addition to the above, on June 4, 2019, MIC Tanzania Public Limited Company entered into a loan facility agreement which was further amended and restated in December 12, 2019, with the Standard Bank of South Africa acting as an agent and a consortium of banks acting as the original lenders. The facility agreement, maturing in 2025, has an all asset debenture securing the whole amount, as well as a pledge over the shares of the immediate holding company of the borrower.

Covenants

Millicom’s financing facilities are subject to a number of covenants including net leverage ratio, debt service coverage ratios, or debt to earnings ratios, among others. In addition, certain of its financings contain restrictions on sale of businesses or significant assets within the businesses. At December 31, 2019, there were no breaches of financial covenants.

Lease liability

As a result of the adoption of IFRS 16 'Leases', and as of December 31, 2019 (see above in the "New and amended IFRS accounting standards") lease liabilities are presented in the statement of financial position as follows:



	December 31, 2019
	(US$ millions)
Current	97
Non Current	967
Total Lease liability	1,063

As permitted under IFRS 16, Millicom has elected not to recognize a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are rather recognized on a straight-line basis as an expense in the statement of income. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture. In addition, certain variable lease payments are not permitted to be recognized as lease liabilities and are expensed as incurred.

The expenses relating to payments not included in the measurement of the lease liability are disclosed in operating expenses (note B.3.) and are as follows:



	2019 (US$ millions)
Expense relating to short-term leases (included in cost of sales and operating expenses)	(5	)

The total cash outflow for leases in 2019 was $236 million. Lease liabilities split by maturity and future cash outflows are disclosed in note D.5..

At December 31, 2019, the Group has not committed to any material leases which had not yet commenced and has no material lease contracts with variable lease payments.

The Group's leasing activities and how these are accounted for

The Group leases various lands, sites, towers (including those related to towers sold and leased back), offices, warehouses, retail stores, equipment and cars. Rental contracts are typically made for fixed periods but may have extension options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

Through December 31, 2018, leases of property, plant and equipment were classified as either finance or operating leases. See note C.3.4. for further details on existing finance leases as of December 31, 2018. Payments made under operating leases (net of any incentives received from the lessor) were charged to the statement of income on a straight-line basis over the period of the lease.

From January 1, 2019, leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the reduction of the liability and finance cost. The finance cost is charged to the statement of income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:


•	fixed payments (including in-substance fixed payments), less any lease incentives receivable


•	variable lease payment that are based on an index or a rate


•	amounts expected to be payable by the lessee under residual value guarantees


•	the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and


•	payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. As it is generally impracticable to determine that rate, the Group uses the lessee’s incremental borrowing rate, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. The incremental borrowing rate applied can have a significant impact on the net present value of the lease liability recognized under IFRS 16.

The Group determines the incremental borrowing rate by country and by considering the risk-free rate, the country risk, the industry risk, the credit risk and the currency risk, as well as the lease and payment terms and dates.

The Group is also exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is adjusted against the right-of-use asset by discounting the revised lease payments using either the initial discount rate or a revised discount rate. The initial discount rate is used if future lease payments are reflecting market or index rates or if they are in substance fixed. The discount rate is revised, if a change in floating interest rates occurs. The Group reassess the variable payment only when there is a change in cash flows resulting from a change in the reference index or rate and not at each reporting date.

According to IFRS 16, lease term is defined as the non-cancellable period for which a lessee has the right to use an underlying asset, together with both: (a) periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and (b) periods covered by an option to terminate if the lessee is reasonably certain not to exercise that option. The assessment of such options is performed at the commencement of a lease. As part of the assessment, Millicom introduced the 'time horizon concept': the reasonable term under which the company expects to use a leased asset considering economic incentives, management decisions, business plans and the fast-paced industry Millicom operates in. The assessment must be focused on the economic incentives for Millicom to exercise (or not) an option to early terminate/extend a contract. The Group has decided to work on the basis the lessor will generally accept a renewal/not early terminate a contract, as there is an economic incentive to maintain the contractual relationship.

Millicom considered the specialized nature of most of its assets under lease, the low likelihood the lessor can find a third party to substitute Millicom as a lessee and past practice to conclude that, the lease term can go beyond the notice period when there is more than an insignificant penalty for the lessor not to renew the lease. This analysis requires judgment and has a significant impact on the lease liability recognized under IFRS 16.

Under IFRS 16, the accounting for sale and leaseback transactions has changed as the underlying sale transaction needs to be first analyzed using the guidance of IFRS 15. The seller/lessee recognizes a right-of-use asset in the amount of the proportional original carrying amount that relates to the right of use retained. Accordingly, only the proportional amount of gain or loss from the sale must be recognized. The impact from sale and leaseback transactions was not material for Millicom Group as of the date of initial application.

Finally, the Group has taken the additional following decisions when adopting the standard:


•	Non-lease components are capitalized (IFRS16.15)


•	Intangible assets are out of IFRS 16 scope (IFRS16.4)

Cash and deposits

Cash and cash equivalents



	2019	2018
	(US$ millions)
Cash and cash equivalents in USD	834	229
Cash and cash equivalents in other currencies	330	299
Total cash and cash equivalents	1,164	528

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

Cash deposits with bank with maturities of more than three months that generally earn interest at market rates are classified as time deposits.

Restricted cash



	2019	2018
	(US$ millions)
Mobile Financial Services	150	155
Others	5	3
Restricted cash	155	158

Cash held with banks related to MFS which is restricted in use due to local regulations is denoted as restricted cash.

Pledged deposits

Pledged deposits represent contracted cash deposits with banks that are held as security for debts at corporate or operational entity level. Millicom is unable to access these funds until either the relevant debt is repaid or alternative security is arranged with the lender.

At December 31, 2019, there were no non-current pledged deposits (2018: nil).

At December 31, 2019, current pledged deposits amounted to $1 million (2018: $2 million).

Net financial obligations

Net financial obligations (i)



	2019		2018
	(US$ millions)
Total debt and financing (i)	5,972		4,580
Lease liabilities (i)	1,063		—
Gross financial obligations	7,036		4,580
Less:
Cash and cash equivalents	(1,164	)	(528	)
Pledged deposits	(1	)	(2	)
Time deposits related to bank borrowings	(1	)	—
Net financial obligations at the end of the year	5,870		4,051
Add (less) derivatives related to debt (note D.1.2.)	(17	)	—
Net financial obligations including derivatives related to debt	5,853		4,051


(i)	As at December 31, 2018, Debt and financing included finance lease liabilities of $353 million. As at December 31, 2019, and as a result of the application of IFRS 16, these are now shown in a separate line under Lease liabilities.



	Assets			Liabilities from financing activities
	Cash and cash equivalents		Other	Bond and bank debt and financing		Finance lease liabilities(i)		Lease liabilities(i)		Total
Net financial obligations as at January 1, 2018	619		2	3,420		365		—		3,164
Cash flows	(72	)	—	621		(17	)	—		676
Scope Changes	7		—	267		—		—		260
Additions/ acquisitions	—		—	—		44		—		44
Interest accretion	—		—	11		—		—		11
Foreign exchange movements	(33	)	—	(84	)	(21	)	—		(72	)
Transfers to/from assets held for sale	6		—	9		(8	)	—		(4	)
Transfers	—		—	3		(11	)	—		(9	)
Other non-cash movements	—		—	(19	)	—		—		(19	)
Net financial obligations as at December 31, 2018	528		2	4,227		353		—		4,051
Cash flows	638		—	1,743		—		(107	)	998
Scope changes	16		—	74		—		178		236
Recognition / Remeasurement	—		—	—		—		109		109
Change in accounting policy	—		—	—		—		545		545
Interest accretion	—		—	8		—		—		8
Foreign exchange movements	(8	)	—	(16	)	—		(6	)	(14	)
Transfers to/from assets held for sale	(9	)	—	(53	)	—		(8	)	(52	)
Transfers	—		—	3		(353	)	353		3
Other non-cash movements	—		—	(14	)	—		—		(14	)
Net financial obligations as at December 31, 2019	1,164		2	5,972		—		1,063		5,870

(i) As from January 1, 2019 and as a result of the application of IFRS 16, finance leases are now shown under lease liabilities.

Financial instruments

i) Equity and debt instruments

Classification

From January 1, 2018, and the application of IFRS 9, the Group classifies its financial assets in the following measurement categories:


•	those to be measured subsequently at fair value either through Other Comprehensive Income (OCI), or through profit or loss, and


•	those to be measured at amortized cost.

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the group classifies its debt instruments:

•

Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other gains / (losses), together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the consolidated statement of income.

•

FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in ‘Other non-operating (expenses) income, net’. Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses and impairment expenses are presented as ‘Other non-operating (expenses) income, net’ in the consolidated statement of income.


•	FVPL: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognized in profit or loss and presented net within ‘Other non-operating (expenses) income, net’ in the period in which it arises.

Equity instruments

The Group subsequently measures all equity investments at fair value. The Group does not hold equity instruments for trading. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognized in profit or loss as other income when the Group’s right to receive payments is established.

Otherwise, changes in the fair value of financial assets at FVPL are recognized in ‘Other non-operating (expenses) income, net’ in the consolidated statement of income as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

Impairment

From January 1, 2018, the Group assesses on a forward looking basis the expected credit losses associated with its financial assets carried at amortized cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the trade receivables.

The provision is recognized in the consolidated statement of income within Cost of sales.


ii)	Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at fair value at each subsequent closing date. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The Group designates certain derivatives as either:


a)	Hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedge); or


b)	Hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge).

For transactions designated and qualifying for hedge accounting, at the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. This is done in reference to the Group Financial Risk Management Policy as last updated and approved by the Audit Committee in late 2018. The Group also documents its assessment, both at hedge inception and on an ongoing basis (quarterly), of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The full fair value of a hedging instrument is classified as a non-current asset or liability when the period to maturity of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability when the remaining period to maturity of the hedged item is less than 12 months.

The change in fair value of hedging instruments that are designed and qualify as fair value hedges is recognized in the statement of income as finance costs or income. The change in fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the statement of income as finance costs or income.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. Gains or loss relating to any ineffective portion is recognized immediately in the statement of income within Other non-operating (expenses) income, net. Amounts accumulated in equity are reclassified to the statement of income in the periods when the hedged item affects profit or loss.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time is recycled to the statement of income within Other non-operating (expenses) income, net.

When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the statement of income within Other non-operating (expenses) income, net.

Fair value measurement hierarchy

Millicom uses the following fair value measurement hierarchy:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3 – Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade ratings. Interest rate swaps and foreign exchange forward contracts are valued using valuation techniques, which employ the use of markets observable data. The most frequently applied valuation techniques include forward pricing and swap models using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, interest rate curves and forward curves.

Fair value of financial instruments

The fair value of Millicom’s financial instruments are shown at amounts at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The fair value of all financial assets and all financial liabilities, except debt and financing approximate their carrying value largely due to the short-term maturities of these instruments. The fair values of all debt and financing have been estimated by the Group, based on discounted future cash flows at market interest rates.

Fair values of financial instruments at December 31,



		Carrying value		Fair value(i)
	Note	2019	2018 (ii) (iii)	2019	2018 (ii) (iii)
		(US$ millions)
Financial assets
Derivative financial instruments		—	—	—	—
Other non-current assets		66	87	66	87
Trade receivables, net		371	343	371	343
Amounts due from non-controlling interests, associates and joint venture partners	G.5.	68	73	68	73
Prepayments and accrued income		156	129	156	129
Supplier advances for capital expenditures		22	25	22	25
Equity Investment		371	—	371	—
Other current assets		181	124	181	124
Restricted cash	C.5.2.	155	158	155	158
Cash and cash equivalents	C.5.1.	1,164	528	1,164	528
Total financial assets		2,554	1,467	2,554	1,467
Current		2,449	1,341	2,449	1,341
Non-current		104	126	104	126
Financial liabilities
Debt and financing(i)	C.3.	5,972	4,580	6,229	4,418
Lease liabilities		1,063	—	1,063	—
Trade payables		289	282	289	282
Payables and accruals for capital expenditure		348	335	348	335
Derivative financial instruments		17	—	17	(1	)
Put option liability	C.7.4.	264	239	264	239
Amounts due to non-controlling interests, associates and joint venture partners	G.5.	498	483	498	483
Accrued interest and other expenses		432	381	432	381
Other liabilities		399	399	399	399
Total financial liabilities		9,282	6,698	9,538	6,536
Current		2,045	2,330	2,045	2,329
Non-current		7,237	4,370	7,493	4,208


(i)	Fair values are measured with reference to Level 1 (for listed bonds) or 2.

(ii) As at December 31, 2018, Debt and financing included finance lease liabilities of $353 million. As at December 31, 2019, and as a result of the application of IFRS 16, these are now shown in a separate line under Lease liabilities.

(iii) The consolidated statement of financial position at December 31, 2018 has been restated after finalization of the Cable Onda purchase accounting (note A.1.2.).

Equity investments

As at December 31, 2019, Millicom has the following investments in equity instruments:



	2019	2018
	(US$ millions)
Investment in Jumia	32	—
Investment in HT	338	—
Equity investment - total	371	—

Jumia Technologies AG (“Jumia”)

Jumia indirectly owns a number of companies that provide online services and online marketplaces in certain countries in Africa.

In January 2019, Millicom was diluted in the capital of the company following the entry of a new investor. This triggered the recognition of a net dilution gain of $7 million in January 2019. In addition, during Q1 2019, in preparation of Jumia's IPO, Millicom relinquished its seat on the board of directors, which resulted in the loss of the Group's significant influence over Jumia. As a result, Millicom derecognized its investment in associate in Jumia and recognized it as a financial asset (equity instrument) at fair value under IFRS 9. On April 11, 2019, Jumia completed its IPO at the offer price per share of $14.5 and shares started trading on the NYSE on April 12, 2019.

As a result, as of March 31, 2019, a net gain of $30 million had been recognized and reported under ‘Income (loss) from associates, net’. Post IPO, Millicom holds 6.31% of the outstanding shares of Jumia.

At December 31, 2019, the closing price of a Jumia share was $6.73, which values Millicom's investment at $32 million (level 1). The changes in fair value of $(38) million for the year ended December 31, 2019 is shown under 'Other non-operating (expenses) income, net' (see note B.5).

Helios Towers plc (“HT”)

In October 2019, Helios Towers plc (a company inserted as the holding company of HTA just prior to IPO) completed its IPO on the London Stock Exchange at a price of GBP 1.15 per share valuing the company at enterprise value of approximately $2.0 billion and a market capitalization of $1.45 billion.

As part of the listing process, on October 17, 2019, Millicom first was diluted as HT management exercised their IPO option rights (~4%). This event triggered the recognition of a non-cash dilution loss of $3 million recorded under ‘Income/(loss) from other joint ventures and associates’.

On the same day, Millicom resigned from its board of directors seats, which resulted in the loss of the Group's significant influence over HT. As a result, as from that date, Millicom derecognized its investment in associate in HT and recognized it as a financial asset at fair value under IFRS 9. The derecognition of the investment in associate and recognition of the equity investment in HT at a fair value of $292 million triggered the recognition of a net non-cash P&L gain of $208 million recorded under ‘Other non-operating income (expense), net’. Fair value was determined using the IPO reference share price of GBP1.15.

As a result of the IPO and the subsequent exercise of the overallotment option, Millicom disposed of a portion of its ownership (in total ~20%) yielding $57 million in gross proceeds and $25 million in net proceeds after fees and Millicom's share in tax escrow of $30 million which has been deducted in full from the gain given the high level of uncertainties used in assessing the potential tax liability. These disposals did trigger a loss of $32 million, as a result of the tax escrow and transaction fees, and are recorded under ‘Other operating income (expenses), net’.

Post-IPO and overallotment option exercise, Millicom holds a 16.2% stake which, as at December 31, 2019, is valued at $338 million (level 1) using a closing share price of GBP 1.58. The gain on derecognition and changes in fair value of $312 million for the year ended December 31, 2019 is shown under 'Other non-operating (expenses) income, net' (see note B.5).

Call and put options

Cable Onda call and put options

As part of the acquisition of Cable Onda, shareholders agreed on certain put and call options as follows:

The put option to acquire the remaining 20% non-controlling interest in Cable Onda became exercisable 42 months after the closing date (December 13, 2018) or earlier upon the occurrence of certain events. In that respect, Millicom determined that, as the put option could be exercised under certain change of control events which could be outside the control of Millicom, the option meets the criteria under IAS 32 for recognition as a liability and corresponding equity decrease. The put option liability was payable in Millicom's shares or in cash at the discretion of the partner. Therefore, Millicom recorded a liability for the put option at acquisition completion date of $239 million representing the present value of the redemption amount. As of December 31, 2018, the redemption price has been valued as being 20% of the equity value implied by the transaction. Any future change in the redemption price will be recorded in the Group's statement of income.

Millicom also received an unconditional call option which became exercisable either 42 months after December 13, 2018 closing date or if Millicom's partners’ shareholdings fall below 10%. The call option exercise price was at fair market value. Finally, Millicom received an unconditional call option exercisable until December 13, 2019, at a price equal to the purchase price in the transaction, plus interest at 10% per annum. The fair values of both call options were assessed as not material at December 31, 2018.

As a consequence of the Telefonica Panama acquisition, on August 29, 2019 the shareholders agreed to amend the call and put options in respect of the remaining 20% non-controlling interest that were set as part of the acquisition of Cable Onda.

First, the parties agreed to new unconditional call and put options to acquire the remaining 20% non-controlling interest in Cable Onda becoming exercisable at any time from July 2022, both, at fair market value.

Second, they also agreed on 'Transaction Price' call and put options conditional to the occurrence of certain events, such as change of control of Millicom or at any time if Millicom's non-controlling partners’ shareholdings fall below 10%, and becoming exercisable on the date of the Telefonica Panama closing (August 29, 2019) and extending until July 2022. The put and call options are exercisable at the purchase price in the Cable Onda transaction (enterprise value of $1.46 billion), plus interest at 5% per annum (put) and at 10% per annum (call), respectively.

Millicom determined that, both the new unconditional put option and 'Transaction Price' put option could be exercised under events which are outside the control of Millicom. The options are payable in Millicom's shares or in cash at the discretion of the partner and therefore also meet the criteria under IAS 32 for recognition as a liability and a corresponding equity decrease - which is the same conclusion as for previous put option for which a liability had already been recognized at acquisition date in 2018. The put option liability is now valued at the higher of fair market value and Transaction Price plus interest at 5% per annum and is payable in Millicom's shares or in cash at the discretion of the partner.

As of December 31, 2019, the value of the 'Transaction Price' put option is lower than fair market value, and therefore the Group recognized the put option liability at the higher of both valuations at $264 million (see note B.5). The Group is required to re-value the liability each reporting date and any further change in the value of the put option liability will be recorded in the Group's statement of income. Both call options are currently not exercisable and therefore no value at December 31, 2019.